New company car fuel rates

HMRC has published new ‘advisory fuel rates’ (AFR) for company cars, which apply to journeys from 1 September 2017, here.

Where an employer reimburses an employee for the cost of fuel that is used for business travel in a company car, the employee will enjoy an element of profit if the payment is too high. This is taxable as employment income. If the AFR (or a lower rate) is used, HMRC will accept that no tax charge arises, without requiring a detailed justification of the figures. An employer may use a different rate in particular circumstances (e.g. where the terrain or the driving pattern results in a higher than usual fuel consumption) but HMRC may require the calculation to be justified.

Alternatively, an employer may pay for all fuel but require the employee to reimburse the cost of private travel. Again, if the amount reimbursed were too low, there would be an element of taxable profit to the employee. However if the AFR (or a higher rate) is used HMRC will accept that no tax charge arises.

Car fuel benefit charge

The car fuel benefit charge is a fixed annual charge, varying accordingly to the carbon emissions of the car. The charge applies if any fuel is allocated for private use in a company car, and the employee is not required to reimburse the full cost of use or does not actually do so. If the AFR is used by the employee to reimburse the company for private use, HMRC will accept that this constitutes full reimbursement.

Timescales

To give employers time to change their systems, for journeys up to 30 September 2017 they may use either the old or the new rates. If they want to make (or require) supplementary payments to adjust the original amounts to the new figures they can, but they are under no obligation to do so.

The rates are reviewed four times a year, on 1 March, 1 June, 1 September and 1 December. For previous rates click here.